With the advent of technology and opening up of the economies of emerging markets, there has occurred a paradigm shift in the manner in which people trade in stock markets now. Trading systems in stock markets have undergone a drastic transformation since the time the first stock exchange was set in Amsterdam during the 17th Century.

Technology has an uncanny habit of throwing up surprises. This could not be truer than in the case of communication and computer technology. Online trade means that you are no longer at the mercy of your broker nor do you have to go to the stock exchange or call your broker for rates to initiate a buy or sell order. Practically all stock exchanges across the world have installed computerized systems facilitating trades to be instituted online from the comfort of your home or office.

You can see live, buy or sell rates and initiate an order that can be executed immediately if a buyer or a seller at your quoted rate is present. What is required of you is to simply get yourself registered with any of the online stockbrokers. Some of the leading banks too provide facilities of online trade.

The procedure is simple. In case you register with a bank, your trading account is linked with your bank account and this requires minimal formalities to be completed. The stockbroker would require you to fill up a form to know the details as mandated by the regulatory authorities on the procedures of know your client. On completion of the papers you are allotted a user name and password and you are on your way to Online stock trade.

Apart from normal delivery based buying and selling, online trading is also done in futures and options, (F&O) whereby you can trade in futures, call and put options of shares as well as indices. Trading in F&O is a procedure wherein no delivery is required and only the prevailing difference between the rates is either paid or received on the date of expiry of the particular settlement period that is usually in the last week of the month. You also have the option of carrying over the trade if you so desire. For trading in F&O you do not have to pay for the entire value of the deal but only a margin amount determined by the exchanges to safe guard the broker against volatility in the market. The margin percentage can vary from share to share as well as for the same share within the month.

Online stock trade has its own benefits and scores highly against the older trading system or even trading through a phone call.

Stock exchanges were very unusual places for the common man and getting familiar with the tricks of the trade was a difficult job. The trading ring was noisy and brokers, jobbers or putters used sign language, and even when they did speak, they used nicknames that only the regulars were familiar with. Also, if you did not take the trouble of going to the exchange personally, there was no way of knowing at which rates the broker had executed your order. Some smart brokers would sit down after trading hours and issue bills in a way that was most beneficial to them rather than their clients.

Even after the stock exchanges set up computer terminals where online trade was possible, issuing orders to a broker on the phone carried its own risks. When the going is good, every thing is hunky-dory but in the event of a major plunge in the market people have seen major tensions build up with brokers dumping stocks of clients to cover their margins with the exchanges. Sometimes you issued instructions that were conveniently misunderstood or not carried out due to one reason or the other.

In Online stock trade you are your own master. You know what you are buying and have the stock in your custody. In F&O segment you trade according to your risk profile and can cut the position you have taken at a moments notice. You can bid for purchase at a lower rate and for selling at a higher rate and be sure that the order has gone into the system. There is also a provision for posting a stop loss so that if the market falls your stock gets sold first thereby minimizing your loss.

There are, however, certain factors that you have to keep in mind before venturing out on Online stock trades. You should be sure of your horizon and risk profile. Usually people keep changing their outlook from that of a trader to an investor as the market falls or rises. This is dangerous and may lead to losses. If you are a trader stick to that profile by putting a stop loss or sell at the target that you had in mind. If you are a long term or short-term investor, give time to your investment to grow rather than take rash decisions on every rise or fall.

Another mistake that people often make is that they get carried away by news on television channels and take rash decisions without taking the trouble of checking out the fundamentals of the company. It should be kept in mind that there are still vested interests around that have a stake in making prices move in a particular direction for them to make a killing.